Has the ACA Bent the Health Care Cost Curve?

White House advisor David Cutler says yes:

In 2007, Obama asserted that his health-care reform plan would save $2,500 per family relative to the trends at the time… Yet events have shown him to be right. Between early 2009 and now, the Office of the Actuaries at the Centers for Medicare & Medicaid Services has lowered its forecast of medical spending in 2016 by 1 percentage point of GDP. In dollar terms, this is $2,500 for a family of four.

The Manhattan Institute’s Charles Blahous cries foul:

Why did CMS lower its estimates of future health spending? It wasn’t because of the ACA. We know this for a fact because CMS has released a memorandum detailing the reasons for changes in their ten-year outlook since April 2010. Here are the factors CMS cited, and the percentage of the improvement each was responsible for:

1) Medicare/Medicaid/other programs “unrelated to the ACA” (50.7% of improvement).

2) Other factors “unrelated to the ACA” (26.1%).

3) Updated data on historical spending growth (21.8%).

4) Updated macroeconomic assumptions (6.1%).

Now, that adds up to 104.7% of the total improvement. The reason these four factors add to more than 100% is that a fifth factor, the “impact of the ACA,” worked against the improvement. Per CMS, adjusting the April 2010 projections for the subsequent impact of the ACA shows it further increasing spending over ten years (equal to and opposite from 4.7% of the total change). CMS analyzes these numbers through 2019, but we can safely say that through Dr. Cutler’s cited year of 2016 CMS sees the ACA doing even less to hold down cost growth (CMS elsewhere found that 2016 is when the ACA would cause the largest “relative increases” in health spending).


About James Hanley

James Hanley is Associate Professor of Political Science at Adrian College and a Fellow of the Institute for Social Policy and Understanding. The views expressed here do not reflect the views of either organization.
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